AlexR

More Fun with Levered ETFs

Some of these ETFs are subject to contango, backwardation, and good old "slippage" in the futures markets. The ones that buy options are also subject to time decay, a lose/lose proposition. One way to avoid these inefficiencies are the ETNs and the Paired Trusts like UOY / DOY. But those have their own issues. There is no free lunch. Really if you want very efficient leverage on the long side, just buy high-beta stocks without margin. On the short side, just forget it.

The American Crisis and the Case for an Inflationary Depression

Unfortunately there are no examples of a Inflationary Depression in U.S. history. Somebody should study what happened to South American economies from 1982 thru 1992 or so. I've personally experienced sustained inflation rates of up to 250% (10%/month), and I can tell you, it's not as socially destabilizing as you might think. Everyone from rich to poor figures out some surprisingly clever ways to manage through it. The only long-term effect is a population that abominates debt of any kind, for about to 10-15 years after recovery (note, although fixed-rate borrowers get a nice bonus in the initial phase of an inflationary spiral, lenders have the last laugh as foreign-currency and commodity-linked loans quickly become the norm).